Student help center: NEGOTIATION

Definition of Negotiation

Negotiation can be defined as a process of making decisions between or among two or more than two people or parties who have conflicting interest and limited resources to work with. The-cost-reduction-consultant defines negotiation as a “process by which typically two or more parties come together to try to create a mutually agreeable contractual decision. Each party will have competing interests and, thus, negotiations can be quite intricate and lengthy. Negotiations end when all parties have come to a final decision and have agreed to contractual guidelines”. They further say that “negotiation is an intricate process that entails more than just numbers, details and information collecting. Skillful negotiation deals with every aspect of negotiation one can think of from running in depth cost analyses to learning how to deal with a specific party at its level and its comfort level”. Answer.com defines “Negotiation as a dialogue intended to resolve disputes, to produce an agreement upon courses of action, to bargain for individual or collective advantage, or to craft outcomes to satisfy various interests. It is the primary method of alternative dispute resolution”.

According to Christopher W. Moore “negotiation occurs between spouses, parents and children, managers and staff, employers and employees, professionals and clients, within and between organizations and between agencies and the public. Negotiation is a problem-solving process in which two or more people voluntarily discuss their differences and attempt to reach a joint decision on their common concerns. Negotiation requires participants to identify issues about which they differ, educate each other about their needs and interests, generate possible settlement options and bargain over the terms of the final agreement. Successful negotiations generally result in some kind of exchange or promise being made by the negotiators to each other. The exchange may be tangible (such as money, a commitment of time or a particular behavior) or intangible (such as an agreement to change an attitude or expectation, or make an apology)”.

In nutshell, we can say that negotiation is process whereby two or more parties try to gain something against another party and ready to sacrifice something for them as a result they reach into a point where both party agree to do and not to do something in the future. Therefore, in negotiation, negotiating parties try to create the win-win situation in which both parties will get something considering the interest of the other parties.

Making a rational decisions

Making a rational decisions is always hard for us because we always have limited information about future events and our decisions is always based on the forecasting of future events which makes our decisions always uncertain and unpredictable in terms of the future outcome of the decision being made. According to Ohio State University management professor, Paul C. Nutt, “we only get about 50% of our decisions in the workplace right! Half the time they are wrong”. Actually this happens because we have to play with very limited information while making decisions. Most of the time our decisions are based on the past similar events and situations where we made the particular decisions which was successful in terms of the expected decision outcome and when we face the similar kind of situation again in the future then we try to relate or compare past decision situation and copy the same decision making technique and sometime even the decision to generate the expected future outcome. In addition to this, most of the time our decisions are misleading because of our own bias and bounded rationality.

Making rational decision in negotiations

My own experience, says that we are more prone to make non rational (irrational) decision while negotiating than while making individual decision. This is because while making individual decisions we just have to think about the outcomes of the particular decisions in terms of our own benefit standpoints but on the other hand while negotiating we have to think about decisions outcome in terms of other party’s perspectives along with our own benefits and interest. Therefore, we are more prone to make irrational decisions while negotiating. In addition to this, sometime we overestimate the other party’s interest rather than our own and became emotional while negotiating leading to the inferior and misleading negotiations.

In my opinion, the most important things we need to consider is the information about what we can and cannot sacrifice in negotiation. Beside this, reservation value of the opponent party is also important while negotiating. While practicing negotiations in our sixth week class I discover that we need to have a lot of preparations as a result negotiation can be more favorable to us rather than our opponents. During the middle of the negotiation practice I realized that we are less prepared to negotiate than our opponents. They force us to reduce the price of our Gas Compressor and our team manager was going to reduce the price in such a point which was completely unacceptable to other team members. It happened because we are unprepared. Furthermore, we were also lacking about the information about our opponents. We didn’t consider about what possible proposal they may purpose us and what is our bottom line or the best possible alternative to the negotiated agreement. In our negotiations we didn’t even calculate the least possible price that we can charge for our Gas Compressor. Therefore, “each party to a negotiation should spend some time in the other party’s shoes, imagining what the other side might really want to achieve. The more one can understand the values, needs, and issues from the other side’s perspective, the better the chance of guessing at what they might want as their priority needs”(Cathy Cronin-Harris)

To make an effective and wrathful negotiations, “we should consider what we will do if we fail to reach an agreement. That is, we must determine our best alternative to a negotiated agreement, or BATNA” (Fisher, Ury, & Patton, 1981). “BATNA is important because the value of our BATNA provides a lower bound for determining the minimum outcome we require of a negotiated agreement. We should prefer any negotiated agreement that provides more value to us than our BATNA over an impasse; likewise, we should decline any negotiated agreement that provides more value to us than our BATNA. This assessment logically determines the negotiator’s reservation point also called an indifference point. It is the point at which the negotiator is indifferent between a negotiated agreement and an impasse”. (Max H. Bazerman, Don Moore) If we are unable to understand the BATNA then our emotions will play negative role leading to wrongful negotiations.

Negotiation made in haste might result in bringing out the adverse result sometimes. The best example can be seen in Nepal’s current situation. At present, Nepal is going under the constitution writing process. But, to come to this point, there have been a lot of negotiations amongst the mainstream political parties and the rivals Maoists. Mainstream political parties such as Congress and UML played a major role in bringing the Maoists into the mainstream politics. The reason behind such achievement was the negotiation process held amongst them.

To bring the Maoists into the main stream politics, major political parties of Nepal and Maoist negotiated each other but that negotiation was not rational in many grounds. This happened because the mainstream political parties were failed to consider their BATNA and negotiated wrongfully which was faulty and harmful to Nepal and its citizens. For example, to bring the Maoist into the mainstream politics they negotiated that Nepal will be no more a Hindu kingdom. Rather it will be a Non – Religious Federal Republic of Nepal eliminating the King from the power and having a presidential form of government. More than 80 percent of Nepalese citizen’s belief this decisions as wrongful as more than 80 percent of Nepalese are Hindu.

As a part of the negotiation, political parties have been successful to throw the king away from the power and have a presidential form of government. Maoists came into the mainstream and election took place in which Maoists won the election. However, they could not sustain more and huge criticisms within few months led them to move away and the turmoil is continuing. None of the politicians are seem to be trustworthy towards the nation and the peace process is under risk. Inflation and security problems are major now in the country. With the shed of such eroding problems, general people are increasing their interests towards the long history of the Kingdom. Another flaws of the negotiations is that both mainstream political parties and Maoist negotiated that Nepal will have federal states and a central governing body. The states will be divided in terms of the castes of the people. Despite the fact that there has been numerous numbers of castes in Nepal habituated in a dispersed form, politic leaders agreed to divide the country into numerous caste oriented states. As an adverse effect, there have been war amongst the citizens to declare their territory as an independent state as per their caste. This seems to be impossible as there are hundreds of such castes. People are now fighting for their castes not for their nation. This has more deteriorated the political stability of the nation. Political leaders are now not being able to figure out the exact model that would suit the nation’s federalism.

The third flaw of the negotiations was that the combatants (Maoist rebel) of rival party Maoist would be merged into Nepal’s national Army. This has been a major obstacle for the peace process. There are around 12,000 combatants who are not competent to be the national Army. Moreover, if the rival party’s militias are put into the national army, the whole structure of the institution might come into the risk as that input might create an environmental degradation as a whole. The negotiation made in past has now been an obstacle itself because it is not proper to merge the fighters of one independent political party into an army force of the whole nation.

I have another personal experience in negotiation. After coming to USA I went to see someone to buy second hand car. It was Honda civic of 1996. The owner of the car was asking 3,600 dollar for the car. I check the car, drive it for a while and find everything was ok for me. When test driving was done we went to his house to negotiate the price. I asked to him that I am ready to buy the car for 3,200. I was thinking that he will reject my first proposal and I will increase the price to 3,400. But he agrees the price. After that I felt like I paid extra for the car. Several questions aroused in my mind. Why did he agree in my first proposal? Is there something wrong with the car? Not only this but also I was started thinking about whether or not to buy that particular car. Finally I bought the same car paying 3,200 but I thought I paid more than what the car is really worth. But later I realized that the car was in great condition and after few months I get the offer from someone to sell the same car for 4,000 dollar. The lesson learned from this incident when two parties are negotiating and their negotiation come to the final point at the first argument or proposal of the opponent party then first party may think that there must be something wrong about the goods (car in my example) on which they negotiate. Therefore, quick acceptance of the proposal by one party in negotiation may result in dissatisfaction in one or both negotiating parties for short term and may even result in failure to negotiate.

Finally in conclusion, to make an effective negotiation, negotiating parties should aware about the need and interest of their own as well as the other party with whom they are going negotiates along with the reservation value of both side. Information about the negotiations and negotiating party is the key for successful and rational negotiation.